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How old is your banking technology? Jim and Dallas discuss reasons why your bank might hold on to old technology in today's technology forward world and how you can begin to replace the old with the new with as little risk as possible.
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Jim Young: Hi, and welcome to the Purposeful Banker, the podcast brought to you by PrecisionLender, where we discuss the big topics on the minds of today's best bankers. I'm your host, Jim Young, director of communications at PrecisionLender, and I'm joined again today by Dallas Wells, our EVP for international operations. We're gonna talk about today about our relationships with technology, both from a little bit of a personal level and from what we've seen in our clients and in our own company, and the inspiration for today's conversation is an article in Scientific America that I came across called Why People Stick With Outdated Technology.
Now, the article's from back in 2015, but it struck a chord with me, and it came from a slightly different perspective in that it gave some rational, defendable reasons for why folks tend to cling to the tech of the past. So Dallas, I want to go through these with you and see whether you think they can apply to the banking industry, and perhaps along the way we can share some of our deep, dark secrets about the outdated tech in our lives. Maybe I'll tell you how far behind the curve I was in getting a smartphone.
Dallas Wells: Okay.
Jim Young: But first off, you're not in studio with me so I can't see you. Are you wearing those silly little Bluetooth wireless headphones for this?
Dallas Wells: I am, and I can tell you, they look just as ridiculous as you imagine they do.
Jim Young: Yeah. We'll get to that ... There's one of the reasons [inaudible 00:02:10] later on for holding onto old technology relates to this, but ... All right. Well, let's go into the first reason they mention is pragmatic, and the example that they use is that sometimes it's still pragmatic to use a fax machine, because there are some security vulnerabilities in sending signed documents online. So let's look at this from a bank perspective. Are there pragmatic reasons that banks have for keeping older versions of tech around when there are newer versions or options out there?
Dallas Wells: Well, first of all, that's one that, surprisingly, you still run across sometimes, is that, hey, the fax is safer, which blows my mind when you feed a piece of paper through a machine, and you know it's gonna spit a piece of paper out on the other end and it's gonna ... Usually that things like sitting by the coffee machine these days, and there's your signed document sitting there for anybody to walk by and grab, so.
Jim Young: That is true.
Dallas Wells: Yeah. Sometimes I think the ... This'll sound unfair, but sometimes I think the technology folks inside of banks, and really anywhere, not to just pick on banks, but they get stuck on the actual tech part of it. So the fax machine, they're looking at the transmission of that data from one end to the other and saying, "Well, that's safer than it being on the internet from one end to the other," and they're forgetting about the human beings and how they actually interact with the things before and after you push go. And so are there pragmatic reasons that banks keep some old stuff around? Yes, I think there are some things, but I think those are starting to fall by the wayside.
Bankers have been scared of the internet longer than most industries have, and I don't know if that's a demographic thing or just the nature of the kind of data and information that they have in their possession, but if it's online, it seems scary. And banks feel like if things are on a hard drive or they're on a piece of paper or if they're within our own firewall, then they are safe, and the reality is, is those are far from safe, and today's cloud-based technology is actually much safer than your internal firewall no matter what your IT guy tells you.
So there are a few cases where, yeah, it might make sense to hold onto old stuff, but I would really push on those. And yes, of course you want to prove the new things and you want to see ... you want to validate that the new stuff is just as safe as the old, but in general security is getting better, not worse.
Jim Young: Yeah. Actually, and your fax example touches on one that reminds me of ... You know, we did this in a previous podcast, talking to our security people, and they talked about the whole ... the sense, the false sense of security you have from keeping it within the walls of your company, or in this case your bank, and it forgets the human element that a huge number of security breaches comes from the employee issue, the disgruntled employee or the person who's careless.
Dallas Wells: Yeah, one of the banks I worked at along the way, our big data breach had nothing to do with tech, it was that one of the employees printed out a bunch of customer documents, had them in their briefcase in their car, and their car got broken into. So, you know, it was ... Their network was very secure, but that had nothing to do with the actual breach, so humans are always the messy part of this.
Jim Young: All right. The second thing they mention is aesthetic, which gets back to your silly headphone look.
Dallas Wells: Yes.
Jim Young: But sometimes older tech is a better experience, and they mention vinyl records as an example as well as driving a stick shift, and I dismiss that first one as a bunch of pretentious hipsters but I wholeheartedly subscribe to the latter. I mean, I miss the feeling of driving with a stick shift, and yet-
Dallas Wells: Yeah, same here.
Jim Young: ... from a tech perspective, you go, "Well, this makes your life easier. You should want this," and I don't necessarily want that. But I'm gonna assume there's nothing really aesthetic about old bank technology, but maybe ... Correct me if I'm wrong here.
Dallas Wells: Well, there might be a couple of examples, and I think these are ones that sometimes bankers push back on, and I think they're right.
Jim Young: Okay.
Dallas Wells: Where sometimes a face to face conversation, maybe that's strange to call that a different version of tech, but I think as we try to digitize everything in a bank and make everything where our customers aren't actually using those very expensive human beings to get things done, those conversations have a lot of value that get lost, and it's things that are hard to measure. But even having somebody exchange emails with a human instead of chat with a bot on your website, there's some aesthetic there where humans still need to be in the loop, and there's parts of the human interaction there that technology hasn't yet equaled.
And so bankers wanting to do, still, face to face meeting or talk on the phone or have human interactions, there's real value there, and I think the key is figuring out where those are most useful and cutting out the ones that are not needed but making the ones that do happen really, really valuable. So kind of amplifying the human beings that are still in the technology stack there.
The other one, maybe this is a personal one but I think it's related. When you're talking ... When customers are talking to people in your branches or they're talking to your relationship managers, and this is probably a, "Get off my lawn," old guy rant, but I get so tired of dealing with people and they only stare at the computer screen because they're typing information into there or they're reading questions off of there. It's such a different experience than when somebody sits down across from you, and if they have a pen and a notepad in front of them. And so they're still taking notes, they're still recording what's going on in the conversation, but it's a much more engaged conversation instead of me talking to a person and a person looking at a screen.
Bankers are terrible about this, and I ... Relationship managers, your branch staff, and it's because we are forcing all of this database entry stuff onto them. You have to record everything into the screen. Again, there's places where that's necessary, but there's also some places where, yeah, the aesthetic of a human being paying attention to you, writing things down by pen and maybe taking the time to go back and record it later, might be worth it, and it's just another case of find the right time and place there. So old guy rant over.
Jim Young: Well, no. That's interesting, because I mentioned that we would maybe talk a little bit about our own company's relationship with that, and that was actually ... This is actually something that's flipped and flopped here a little a bit at PrecisionLender. When I came in, I was like, "What do you mean I can't have a laptop in a meeting?" and the thing was is well, we want to make sure we're listening and paying attention and there's all those distractions when you open up your laptop, and my pushback was is, "Yeah, but I write terribly, and I feel like I've then ... In order for me to really write legibly, I'm then sitting there staring at a notepad the whole time instead of staring at you, and then I forget ... then I can't read it, and then it's essentially lost." And so we have actually gone back toward using laptops in that way, but I think you have to be very careful, and this goes against [crosstalk 00:10:00]-
Dallas Wells: It's a tricky one.
Jim Young: ... Yeah. You know, you shut down. In our case, you shut down Slack. You snooze it. You don't ... You close out Outlook. The only thing you have open in a screen that you can take notes on, because otherwise it's just too tempting.
The next one, they don't list this as a separate reason, but I'm gonna break these next ones out into separate reasons. You hold onto old tech just because it still works really, really well, and the example they use here ... And again, a disclaimer here that we are not delving into politics at all, this is just an example ... but is the AK47. It is a World War II era rifle, but it is still around. I mean, that's ... Is there old bank that stays around simply because it just gets the job done really, really well?
Dallas Wells: Yeah. I think there's lots of that. The first one that came to mind as you were saying that is the ATM. The ATMs been around forever. There's been marginal improvements around it. Some of them now have where you can buy stamps or order concert tickets or make a deposit or it'll interact with you by voice and it has a very friendly British accent, but that's kind of ... You know, it's doing the same job that it did when it was first introduced whenever, 40, 50 years ago now, but it was a way for people to get access to those basic transactions without slowing themselves down or slowing the bank down.
So there are some things like that, that they just work, and we can incrementally improve them, but they're doing their job. The ones that are tricky are all the Excel spreadsheets that you still see floating around. They get the job done. I think the questions is, is are they still doing it really, really well? A few of them are. Not near so many as the authors of those spreadsheets probably believe. So those are the ones where we're seeing lots of banks now second guess that, so I think what you'll see is there will still be some old-fashioned ATMs with the old kind of green screen look to them that are gonna stay in place because they work, but you're gonna see more and more of those messy spreadsheets and things like that go away.
Jim Young: Yeah, and I think sometimes that also gets to the question of what are you ... is it doing the right job at that point, too.
Dallas Wells: Yeah.
Jim Young: Right? Yeah.
Dallas Wells: Yeah, exactly. The ATM works because it has a very strictly defined purpose. It's very clear what it's doing. Customers know what they want to get out of it. The bank knows what they want to get out of it. Spreadsheets, the lines get really blurry, and once you aren't real clear what the job of that thing is, that's when you get in trouble.
Jim Young: All right. And going ... keeping on with the theme of World War II technology, this piece also mentions that there ... And I actually hadn't heard of this, which is interesting, but there are theories out there that the United States could have ended the war in the Pacific earlier simply by investing more in the technology of that day, which was basically lots and lots of fighter planes, instead of their focus on the technology of the future, which was the atomic bomb.
Seguing gingerly here ... And actually, you know what? I'll go with a slight comic segue here, which would be sort of the Austin Powers, shooting Austin Powers with a gun versus shooting him with a sharks with laser beams. So are there cases when it's better to just double down on investing in and improving on what you have instead of taking the time, energy, and resources to go with what the next generation of tech that's out there?
Dallas Wells: Yeah. I think this is one that's really interesting. First of all, I hadn't heard that theory before either, but I think that's an interesting thing to explore, and I think the reason it's really interesting is how banks are tackling new technology. So the way I would look at that would maybe be a slight shift from how you asked it. It's not about doubling down on what you have versus the next generation; I think it's about how you decide what you're investing in. And so if you think about what was going on there, it was a secret project, and we put a ton of resources into it over a long time frame, hoping that it would actually work.
And so there was this long lead time, tons of resources, tons of opportunity cost. In this case, we could have invested that, those resources, elsewhere, for the hope that this thing would eventually do what it was promised to do. And the alternative was we had some proven techniques that we were getting lots of data points back on how well is this working, and you could pick and choose, okay, lots and lots of fighter planes. Well, which ones, and in which places, and which things about those are working really well, and can we tweak those?
So it's this marginal improvement, and tweaking at the edges and getting evidence on what's working and what's not. So we've talked a lot about that on this podcast and in our book about kind of small, well-contained, measured experiments of let's try this thing and get some quick feedback of does this work or does it not. You know, the minimum viable product approach to banking. So the next generation of tech may be right, but let's not go in a whole for two years and spend millions of dollars on it and hope that what comes out the other side is what you're looking for. Let's do small, little, measured things and prove that this is working and incrementally ramp it up with some evidence and feedback and tweaking along the way so it's a more agile approach. I think that's maybe the interesting part of this, is how we actually make those decisions and allocate resources.
Jim Young: Yeah. Kind of hard to go small and incremental with an atomic bomb.
Dallas Wells: That one is kind of the classic all or nothing approach there, isn't it? Yeah.
Jim Young: But actually, I had another thought about this one, too, though, is play that scenario out in your mind, and let's say the United States did that and they did end the war in the Pacific that way. Keep in mind, they were not in a vacuum when it came to this and that the Soviet Union and the Iron Curtain did come up with a atomic bomb shortly thereafter. And maybe you could look at it from that perspective of yeah, you can do what you've been doing really well to sort of win the day, but are you then set up for what's next? And in that case, maybe you end the war earlier, but now you're not set up for the next couple of decades of trying to balance out the power with the Soviets and the-
Dallas Wells: Yeah. And I think that's the other big concept we've talked about a lot here, which is a focus on short term results can be very disastrous for you long term. And so it's the tricky thing that all businesses face of how do you make your number this quarter and also ensure that the quarter five years from now is also possible to hit, and so that's where you have to get evidence along the way, but there has to be a point on the horizon that you're aiming at. So in that case it was, okay, there is this new era of weapons upon us. We have to make progress towards it, but maybe not at the exclusion of some of these other things. Maybe we find a way to incrementally get there.
And I think the evidence has shown ... So, I'm not a weapons expert. We'll go back to actually getting technology into banks. The evidence has shown that if you do it in small, bite-sized pieces, you actually make faster progress because you don't waste time on failed long term experiments. Instead, you're making ... you're getting feedback and getting a better, clearer path to that end result that you can do along the way. Again, nuclear bombs are probably their own special animal, but forward progress with constant feedback, kind of our old OODA loop from our buddy John Boyd.
Jim Young: All right. So we're gonna try to move out of our extended conversation of warfare and weapons technology here.
Dallas Wells: Yeah, that was depressing. Thanks a lot, Jim.
Jim Young: I know. Let's go onto the final area that Scientific America talks about is holding on for ... A reason for holding onto the past is what they call rescue tech, and basically it's the idea that you hold onto stuff because they don't have an updated format. It mentioned some places with ... I don't know about library card catalogs, because you should be able to update that, but the ones I came to mind for me is the 8,000 cassette tapes I have in the back of my closet from my days of announcing Duke football on student radio. And I will hold onto those for forever because that's the format I've got for them, and I suppose there are places out there that could translate it, but that's a little bit of a risky proposition.
So are there cases at a bank where they have to hold onto old tech because otherwise something valuable is gonna get lost?
Dallas Wells: I think your questions just summed up why all the biggest banks in the world are paralyzed with their technology a little bit right now. It's because of all the legacy stuff, and so all of those large banks were built over the last several decades by acquisitions and piecing together all these different entities. And so in the background, every time they would glue these two business together, there was exactly that happening. There was some technology that was surviving and some that was gonna go away, but you had to be able to get back to that old stuff.
So this is ... And I'll date myself a little bit here, but in my early days in banking, my first summer job, one of the things I would occasionally have to do is go down into the basement and fire up the old microfiche to look at old customer statements to find old records that we had. So we'd done a core system conversion. The old stuff that was old enough got put on the microfiche and the new stuff could be searched in the system, and so if you've ever been a bank customer and wondered why, if you asked the bank for, "Hey, I need a copy of this check from however many years ago," and they say, "Sure, that'll be 30 bucks, and we'll get it to you in a month." That's why. There's some poor schmuck down in the basement looking at microfiche trying to find a copy of your check.
So there are all these legacy systems. Hopefully the microfiche is now gone, but I bet there's some cassette. I bet there's some disc copies of stuff in banks that are sitting in vaults, and it's there just in case. And what's the interesting thing about that is, at PrecisionLender ... So we've had this philosophy about our business that, and this comes from Carl Ryden, he says, "Hey. Data storage is now, essentially, free, so don't throw away anything." Right? There's probably some insights there, if we hold onto stuff, that will be useful to us. So every time somebody sends us their customer records, we create a snapshot of that, and that way we can go back and look at trends over time instead of just overwriting it every time. Why do that when storage is free?
We've heard from some of these large banks now a different kind of perspective. Before, prospects always loved to hear that. That's great, you guys don't throw things away. Some of the larger banks actually don't like that answer. They say, "Wait, we don't actually want you to have access to that old stuff." We actually have now a new corporate policy that says anything older than X years is destroyed. Now, there's some legal reasons for that. Right? If there's discovery in a lawsuit, you can just say, "Hey, it's our policy. Anything older than that's gone," so it reduces your legal liability. Some of it's also, though, this exact issue of we don't have to keep things locked away in a vault on a floppy disk to be able to get back to it because we've made policies for that stuff to all just be gone.
So, yeah, there's all kinds of stuff hanging around, and banks have really struggled with it, and in many cases they're kind of drowning in it, and I think this is an issue that they'll continue to deal with, is as the formats change and the tech changes, what do you do with the old stuff and how do you make it backward compatible to be useful to you?
Jim Young: Yeah. And going again to another personal analogy here actually is if you look at my email account, some people faint at it, because I essentially ... I subscribe to the Carl Ryden nearly infinite storage idea. I really don't delete very many emails anymore. Hopefully I don't have any-
Dallas Wells: Yeah, why would you? Yeah.
Jim Young: Well, I don't know.
Dallas Wells: You know, that used to be a thing. You had to like actively clean up your ... You know, because you're, "Oh, my Gmail account's close to its storage limit," and you had to just constantly wean that thing down. That's not a thing anymore.
Jim Young: Right, and I also don't have to do the whole microfiche aspect of it, so it's very ... Email is very searchable, so I can go find stuff, and it's good for me because Lord knows I can't remember past conversations. At least I've got it somewhere else on there.
Dallas Wells: Yeah.
Jim Young: But this was a fun conversation that I think touches on some really interesting ideas and some very legitimate reasons for why it's not such an obvious thing to move to a new technology, but also some arguments for why, even though it's understandable, you still sort of have to, in some cases, grit your teeth and make that jump.
Dallas Wells: Yup. Jim, I'm keeping my silly little Bluetooth wireless headphones, so that's the takeaway from this episode.
Jim Young: And I still have the chords on mine, which I will probably get clotheslines on when I get up, and [crosstalk 00:23:49], so yeah.
Dallas Wells: All right, fair enough.
Jim Young: All right. Well, that'll do it for this week's show. If you want to listen to more podcasts of check out more of our content, you can visit our resource page at precisionlender.com or you can just head over to our home page to learn more about the company behind this content.
Finally, if you like what you've been hearing, make sure to subscribe to the feed in iTunes, SoundCloud, Google Play, or Stitcher. We love to get ratings and feedback on any of those platforms. Until next time, this has been Jim Young for Dallas Wells, and you've been listening to the Purposeful Banker.
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As a Content Manager here at PrecisionLender, Maria develops the messaging, stories and content pieces for prospects and current clients – showing them the value in PrecisionLender. Her passion for serving others is evident as she leads the volunteer program here at PrecisionLender. Maria’s ability to be organized and constructive, along with her ability to be practical makes her an exceptional addition to our team.
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